Sally Beauty’s second quarter results were met with a strong positive market reaction, as the company delivered non-GAAP profit well ahead of analyst estimates despite flat revenue growth. Management attributed this outperformance to disciplined cost control and margin expansion, underpinned by the “Fuel for Growth” program and operational efficiencies. CEO Denise Paulonis emphasized that robust sales in the color category and a rebound in the Beauty Systems Group (BSG) segment supported stable profitability, stating, “We delivered 13% earnings per share growth amidst the complex macro backdrop.” Management also highlighted the expansion of digital marketplace partnerships and the effectiveness of marketing efforts as key contributors to the quarter’s performance.
Is now the time to buy SBH? Find out in our full research report (it’s free).
Sally Beauty (SBH) Q2 CY2025 Highlights:
- Revenue: $933.3 million vs analyst estimates of $932.7 million (flat year on year, in line)
- Adjusted EPS: $0.51 vs analyst estimates of $0.42 (21.4% beat)
- Adjusted EBITDA: $115.3 million vs analyst estimates of $103.8 million (12.4% margin, 11.1% beat)
- Operating Margin: 8.4%, in line with the same quarter last year
- Locations: 4,425 at quarter end, down from 4,460 in the same quarter last year
- Same-Store Sales were flat year on year (1.5% in the same quarter last year)
- Market Capitalization: $1.24 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Sally Beauty’s Q2 Earnings Call
- Oliver Chen (TD Cowen) asked about macro impacts on Sally Beauty versus BSG and the pace of store refreshes. CEO Denise Paulonis explained that color sales drove Sally performance while BSG benefited from a rebound in stylist demand; store refreshes are being rolled out cautiously to evaluate returns.
- Susan Kay Anderson (Canaccord Genuity) inquired about recent store closures and performance of renovated stores. Paulonis clarified closures were mostly in Europe due to a strategic exit from Spain and noted early positive trends in refreshed stores, with more data needed for long-term impact.
- Olivia Tong Cheang (Raymond James) probed the potential for expanding new categories in Sally Beauty stores. Paulonis detailed targeted SKU rationalization allowing for more cosmetics, skin care, and fragrance, with early results showing increased cross-category shopping.
- Unidentified Analyst (Morgan Stanley) questioned strategies to revive the softer care category. Paulonis pointed to refined tactics in personalization, marketing, and promotions, aiming to address customers’ preference for single-item promotions and value messaging.
- Sydney A. Wagner (Jefferies) sought clarity on balancing consumer value sensitivity with planned price increases. CFO Marlo Cormier emphasized limited near-term price adjustments and a focus on vendor cost-sharing and sourcing optimization to offset tariff impacts.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be monitoring (1) the sustained impact of digital marketplace partnerships on customer acquisition and sales, (2) the effectiveness and financial returns of the ongoing Sally brand store refresh rollout, and (3) the recovery trajectory of the care category through targeted marketing and promotions. Additional attention will be paid to gross margin management as the company navigates tariffs and macroeconomic uncertainty.
Sally Beauty currently trades at $12.87, up from $9.97 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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